Around the second quarter of the year, many analyst, including me, were beginning to become very worried about the prospect for Thailand. Globally, there were mainly two school of thoughts, one, Thailand is heading into a crisis and another, everything is OK, and it is business as usual. The business as usual crowd was spearheaded by the likes of Mark Mobius and money pumped into the Thai stock market, expecting Thailand’s GDP to hit around 3% this year. Now, towards the end of the year, Thailand’s GDP for this year is expected to be below 1%. Those that saw problem ahead for Thailand, earlier in the year, cited, mostly, a Thai traditional elite, going out of control with the Dictator and junta it created, along with serious problems for Thailand on, Geo-Politics, Geo-National Security and Geo-Economics. Also, I started a conversation, quite a while back, about “Sustainability.” My argument was mainly, without real and genuine democracy and human rights, economic development can not be sustained.

If forecasts are anything to go by, Asia will account for two thirds of the global middle class population in 2030. Whereas investors and businesses already did the math and are waiting in line to capitalize on rapidly expanding consumer markets, political analysts are only slowly beginning to grasp what the rise of Asia’s middle class means for governments in the region, especially in non-democratic countries.

Will the middle class demand more democracy, representative government, and a greater say in the running of their countries? Or will it remain satisfied with one-party states, military regimes, or elected autocrats, as long as the economy grows and their material needs are satisfied?

Note: The BTI uses five criteria to measure a country’s democracy status: stateness, political participation, rule of law, stability of democratic institutions, and political and social integration. The size of a bubble represents the size of a country’s population.
Sources: Middle-class population (in percent): “Development, Aid and Governance Indicators (DAGI)”, Brookings Institution, 2012; Democracy status: BTI 2014, http://www.bti-project.org; Population data as of 2012: World Development Indicators of the World Bank; Taiwan: Directorate General of Budget, Accounting and Statistics.

What seems clear is that a substantial middle-income population does not translate into a healthier state of democracy in any straightforward manner. The size of the middle class and the state of political transformationbased on the Bertelsmann Stiftung’s Transformation Index (BTI) appear to be only loosely correlated in selected Asian countries. In relative terms, Indonesia’s middle-income population is half the size of Thailand’s, but democracy has fared much better in Indonesia than in the kingdom on the Southeast Asian mainland.

The answer to the question what political role the middle class will play depends on which middle class one looks at, at least in Southeast Asia. The term is therefore better used in the plural, i.e. middle classes, to reflect their internal diversity. This diversity goes a long way toward explaining not just the class dynamics of Southeast Asian societies but the rocky political paths that some countries in the region have recently taken. Thailand and Indonesia are cases in point.

2014 was a decisive year for both nations. Thailand experienced yet another wave of violent protests, whichculminated in another military coup, while Indonesia held a peaceful presidential election, which nevertheless revealed a political rift in the country. In both states, political developments were affected not primarily by tensions between the extreme ends of society, but within the growing middle of the societal hierarchy.

It may seem odd to compare two seemingly disparate places like Thailand and Indonesia, the former being ruled by a bizarre and reactionary military junta and the latter by a democratically elected president who ran on a progressive ticket. In fact, in recent months analysts have started to hold up Indonesia as the new beacon of democracy in the region, contrasting it with Thailand’s constant slide into the political abyss.

It is easy to agree with such an analysis if one compares the rational and humble nature of Indonesian president Joko “Jokowi” Widodo with the clumsy exploits of Thailand’s military dictator Prayuth Chan-ocha. But this means forgetting how narrowly Indonesia escaped a return to its authoritarian past, the so-called New Order, in the presidential elections: Almost half of Indonesian voters risked a return to the New Order by supporting the controversial candidate Prabowo Subianto, who promised a firm dictatorial grip. And even though Prabowo was the losing candidate, parties backing him still dominate the parliament and began an assault on democracy in September by trying to scrap direct elections at the local level.

In search of explanations for the polarization in both countries, it is important to look beyond a simple poor-vs.-rich dichotomy. Media reports suggested that it was not primarily the poor and uneducated parts of Indonesian society who supported Prabowo – quite the opposite. In the weeks before the elections, Jokowi had to work particularly hard to woo the urban-based and supposedly rationally minded middle class to secure his victory. While voters with only a primary-school level of education were mostly backing Jokowi, those with a university degree and a monthly income of more than two million Indonesian rupiah (US$165) had been shifting their support to Prabowo.

It appears as if it their nostalgia for the good old days of effective authoritarianism, and their disenchantment with a corruption-prone democracy, almost led to Indonesia’s democratic demise. Anti-democratic protests in Thailand were likewise driven by an urban-based middle class with fond memories of a time when Thai generals ruled the kingdom in tandem with the monarchy. Democratic support, in contrast, seemed to come from members of the emerging lower middle class in the provinces.

The historic trajectory of Southeast Asia is key here. In the second half of the 20th century, developmental regimes throughout the region fostered the emergence of a middle class that owed its existence to these authoritarian states. Middle-class identities were not shaped in a democratic setting or in resistance to government interference, but in the context of a symbiotic relationship with it. Only when this arrangement started to fail, particularly in the wake of the 1997 Asian Financial Crisis, when the frailty of technocratic efficiency and top-down development became obvious, did the middle class help overthrow authoritarianism.

But as the region’s economies expanded again and captured people at the margins, a new and aspiring middle class stirred suspicions among the established one, with its sentimental ties to the old developmental regimes. While the newcomers considered democracy a useful tool to secure for themselves a slice of the national cake, the established middle class – relatively small in numbers and therefore insecure – grew more defensive. Its members had simply not learned how to share. These middle-class reactionaries again supported authoritarians like the royalist generals in Thailand and the New Order lackey Prabowo in Indonesia, thereby reversing, or endangering, democratic progress and the material improvement of their new fellow class members.

The “Tyranny of the Old Middle” has succeeded in destroying democratic institutions in Thailand. Indonesians narrowly averted this fate for now by electing Jokowi, although his winning margin was, as already noted, far from impressive. It is the Old Middle that Jokowi and other democrats in Southeast Asia have to convince of the need for greater solidarity and democratic governance.

2014 has been an historic year for protests in Asia, where until now political freedom has lagged economic growth.

By Nithin Coca

Nithin Coca is a freelance writer and journalist who focuses on cultural, economic, and environmental issues in developing countries. Follow him on Twitter @excinit.

November 20, 2014

In Hong Kong, it’s a yellow umbrella. In Taiwan, the similarly bright sunflower. Thailand pitted yellow-shirts against red-shirts, while in Indonesia, it is the national colors red and white painted on faces or plastered on signs. In South Korea, it is more subtle – small, yellow ribbons and flags. Together, these symbols of different yet connected movements have turned 2014 into a banner year for protests in many rapidly growing and changing countries in East and Southeast Asia, and may foreshadow coming change in the region.

At a glance, Occupy Central in Hong Kong or the hunger strikes by families connected with the Sewol ferry disaster in South Korea may seem focused on specific concerns, relevant only to the people in that society. However, take a step back and the movements are, surprisingly, quite similar. Occupy’s focus is on Hong Kong gaining its long-promised democracy, but it is fueled by living costs, limited infrastructure, and rising inequality – the same challenges facing Indonesia and Thailand. In Seoul, initially it seems that protestors in the city center want justice for the hundreds of victims of Sewol. But what they are calling for – an investigation into what they see as deeply ingrained corruption and collusion connecting the ferry company, the police, politicians, and perhaps even the president – has implications that go far beyond a simple criminal case.

Thailand also saw similar slogans about corruption at both red-shirt and yellow-shirt rallies. “In [Thailand and Hong Kong] protesters are calling for accountability and greater transparency in the political and economic realms,” said Matteo Fumagalli, head of the Department of International Relations at Central European University.

The most dramatic protests took place this March in Taiwan, where youth stormed past police barricades and occupied the Taiwanese Parliament, in opposition to a trade deal with China that they believed with erode the island-state’s independent political identity.

Individually they are examples of social unrest, but collectively, do these movements herald something greater? Are they an Asian version of 2011, when protests in Tunisia spread into neighboring Egypt, Libya, and then throughout the entire Arab region. At the time it was seen as a sign that the Arab world’s citizens were tired of the same-old dictators and wanted dramatic societal change. Asia, too, faces a similar “Democracy Gap.” “In some countries in the region the growth of democracy has not kept pace with economic development. It seems clear that economic progress alone does not necessarily lead to democratic gains,” said Peter Manikas, director of Asia programs for the New Democratic Institute in Washington D.C.

It is not only political institutions that have lagged. Corruption remains high, and media freedom has actually regressed, as Reporters without Borders, a France-based NGO, noted in its 2013 and 2014 World Press Freedom Indexes. This year, only Taiwan was ranked as having a “satisfactory” media environment; while countries like Japan, Thailand, Hong Kong, and South Korea have seen their rankings drop, some dramatically.

So why now? Several factors are present. Economic growth in several countries has not been evenly distributed – the GINI coefficient, which roughly measures inequality, has risen substantially in the past decade in Hong Kong, Indonesia, China, and Thailand. A higher coefficient means greater inequality, and according to a report released by the OECD, if Asia was taken as a whole, its GINI coefficient would have risen from .39 to .46 from 2001, a stark contrast to the dips seen over the same period in numerous South American and African countries at similar development levels. A number above .4 is the level used by analysts to gauge the potential for social unrest – the very unrest we are now seeing in the region. It should come as no surprise that Hong Kong, one of the world’s richest economies per capita, has a GINI coefficient above .53, making it one of the 15 most unequal societies in the world.

The cost of living is also rising, and there is a greater awareness of the negative role of corruption in society – an issue regularly cited as one of the top concerns of citizens all across the region. Younger generations are especially effected, as they find that the social services and safety nets available to their parents may no longer exist when they are ready to use them.

China is the other elephant in the room. Twenty-five years after students protestors at Tiananmen Square were driven out by military force, the country remains authoritarian, and thus far there is no major or nationwide protest movement taking place within its borders. But it is China’s growing influence that is a focal point for protests in Taiwan and, more recently, in Hong Kong, where 16 years of reunification has yet to forge the common identity that Beijing had sought. Even in South Korea, protestors have cited the recently announced free trade deal with China as an example of President Park Park Geun-hye’s incessant and questionable collusion with business, and her disregard for the interests of regular Koreans.

In fact, in two of the countries where protests have played out this year, we can see clearly two directions that this “Asian Spring” could take. In Thailand, the stand-off between yellow-shirt protestors, who wanted an overthrow of Prime Minister Yingluck Shinawatra’s administration for alleged corruption, and more populist, pro-Thaksin (the former prime minister deposed in 2006) red-shirts, led to a military coup this May. The military-led, constitution-less government has subsequently taken steps to curb public debate, media freedom, and citizen power. This is contrasted with what happened in Indonesia (a fellow ASEAN member-state), where a bill in August to remove direct elections for regional positions – a blatant attempt to entrench political power – passed by the outgoing parliament that was governed by a coalition of parties dominated by the old guard, was followed by a massive public backlash that led outgoing President Susilo Bambang Yudhoyono to issue a law annulling the bill.

In one country populism and civic engagement won. In another the old-guard maintained and even strengthened their grip on society. It is the same battle being fought right now in Hong Kong and South Korea, and it is bubbling beneath the surface in China and Japan.

Albert Goldson, an Asia analyst with Indo-Brazilian Associates, a New York City global advisory firm and think tank, cautions against comparing what’s happening in Asia too closely with what happened in the Arab world three years ago. The vast geographic, cultural, and economic differences between OECD members South Korea and Japan, Hong Kong’s hybrid status, and still developing Indonesia and Thailand make comparisons challenging; and despite the common issues, there has been little linkage or communication between the youth leaders in each country. The analogy is overly simplistic – these are two vastly different parts of the world.

Victor Louzon, a Fox Fellow and expert in East Asian history at Yale University, agrees; believing that for Hong Kong, this battle will not be won in the short-term. “Future political evolutions will depend on [Hong Kong’s] capacity and will to mobilize every time Beijing encroaches on political freedom, and to mobilize periodically in favor of genuine elections, because that would raise the political cost for the Chinese government.”

Perhaps that is a good thing. In the Arab world today, the euphoria of 2011 has been transmogrified into a horrific civil war in Syria, military rule in Egypt, and continued fragility in Libya. Only Tunisia – that initial spark – seems to have emerged as a democracy, and many observers are unsure if even that will remain in the years to come.

Unlike 2011, the 2014 Asian Spring is focused not on building revolutions to sweep aside old powers, but to bring concrete changes to society and increase the ability of citizens to have their say. An Asia that is more responsive to its citizens is undoubtedly good for the world, which will be watching closely to see if the region follows the direction of Thailand, which entrenched old power, or instead moves towards Indonesia’s model of an enlarged, active, civic sphere. Whatever happens, the impact will be felt around the world.

Nithin Coca is a freelance writer and journalist who focuses on cultural, economic, and environmental issues in developing countries. Follow him on Twitter @excinit.

The following is from The News Room at Financial Times ASEAN Economic Summit 2014 (Source)

Good morning. Allow me to first thank the Financial Times for inviting me to speak at this forum.

Since its founding in 1888, the Financial Times has been known to provide credible, accurate and timely content for the global business community. This new ASEAN Economic Summit is an excellent initiative. It is taking place at an important juncture for our region, as concrete plans are being advanced to achieve an ASEAN Economic Community (AEC) by 2015.

My remarks this morning will focus on the prospects for ASEAN economies, the state of ASEAN’s community building and integration efforts, as well as its importance in enhancing the regional growth potential.

ASEAN: The New Frontier for Growth

First, an overview of ASEAN’s growth potential. As a region, ASEAN is a large and important market with significant opportunities. We have a growing population of 620 million people, and make-up the third largest combined GDP in Asia – at US$2.3 trillion in 2013.

ASEAN is currently one of the most dynamic and fastest-growing regions in the world. From 2002-2012, ASEAN grew at an average of 6 percent, compared to the global average of 4 percent, which is quite commendable.

Demographic trends are positive for most countries in the region. The young population and growing workforce are supporting healthy domestic demand. ASEAN’s combined labour force is the third largest in the world, behind China and India. In contrast to the rest of Asia where the labour force is expected to shrink, ASEAN’s young working-age population continues to grow at a fairly strong pace. Around 60 percent of ASEAN’s current population is made up of those below 35 years old.

An accompanying trend is the rising prominence of a wealthy middle class, which is helping to drive their countries’ per capita income growth. The Philippines, for example, took just 7 years to double its per capita GDP from US$1,660 to US$3,270. Experts forecast that Indonesia too, will see its share of private consumption rise from 56 percent in 2012 to 65 percent in 2030. Looking ahead, strong domestic demand will continue to underpin ASEAN countries’ GDP growth. This makes ASEAN an investment bright-spot that one should not overlook.

Thus, besides domestic demand, another important growth driver for the region is foreign direct investment (FDI). For the past three years, FDI flows into ASEAN have exceeded those into China. In 2013, the five biggest economies in Southeast Asia received US$128.4 billion in foreign investment, outstripping FDI into China for the first time.

ASEAN’s proximity to major markets such as China and India reinforces its status as a crucial global value chain player and a preferred production base for many multinational corporations. In the U.S. Chamber of Commerce’s “ASEAN Business Outlook Survey 2015”, 66 percent of respondents said that ASEAN markets will become more important for their companies’ worldwide revenue over the next two years. Meanwhile, 89 percent expect their companies’ levels of trade and investment in ASEAN to increase over the next 5 years. These are positive signs that ASEAN has become a new frontier for growth.

Growth Prospects of Key Southeast Asian Economies

The growth prospects of key Southeast Asian economies give us added reason for optimism. The average GDP growth of the 10 ASEAN countries in the last five years has ranged from 2.9 percent for Thailand to 5.9 percent for Vietnam and Indonesia. There are a few rising stars contributing to ASEAN’s growth story.

Top on the list is Myanmar, which has embarked on a momentous journey to reform its economy and strengthen its financial sector. Coupled with its strategic location at the intersection of China and India, a generous endowment of natural resources, and a large, youthful and literate population, Myanmar is poised to be the next economic frontier in Asia.

The Philippines too, has achieved much in the last decade. It has sustained strong growth and macroeconomic stability, both of which have contributed to a vastly improved business climate. It has moved up significantly in the 2014 World Economic Forum (WEF) Global Competitiveness Report, advancing six positions to rank 59 out of 148 economies. Most expert projections see the Philippine economy continuing to grow at over 6 percent for the next three years – in other words, adding about a fifth to the country’s existing wealth by 2016.

Growth prospects for other Southeast Asian economies are also promising. Malaysia and Vietnam are on track to achieve healthy growth in 2014, growing at approximately 5.5 percent and 5.8 percent respectively. According to the World Bank, Indonesia is likely to rank ahead of Japan as the world’s 4th largest economy by 2050, behind China, the US and India. In addition to its abundant natural resources, Indonesia’s demographic dividend, increasing urbanisation coupled with a corresponding rise in investment is expected to drive long-term growth.

Journey towards integration is well on course

ASEAN’s ability to fully realise its potential depends fundamentally on our efforts in regional integration. Most ASEAN countries are too small individually to be game changers in the global market. But as an integrated region, we can benefit by leveraging our collective strength in responding to external challenges.

We stand today on the brink of very exciting times for ASEAN as we draw closer to the vision of an ASEAN Economic Community (AEC) in 2015. If the AEC vision was aspirational when it was first conceived, it is now an imperative. This has prompted an increased momentum in efforts to realise a truly integrated and competitive region. With close to 80 percent of prioritised measures identified for 2013 already implemented, the journey towards an AEC is well on course.

Significant advancements have been made towards creating a tariff-free zone for ASEAN products. Today, close to 90 percent of products enjoy zero import duties under the ASEAN Trade in Goods Agreement (ATIGA). As a result of initiatives to increase transparency and reduce non-tariff barriers (NTBs), businesses can now operate in a relatively stable and predictable environment.

For trade in services, the 10th package of commitments under the ASEAN Framework Agreement on Services (AFAS) is set to be completed by 2015. Under each package, ASEAN countries commit to opening up more services sectors for other Member States. What this means is that businesses can expect a progressive reduction of services barriers, such as foreign equity limits in the ASEAN countries.

On the investment front, stronger and pro-business investment rules via the ASEAN Comprehensive Investment Agreement (ACIA) will enhance protection for investors in ASEAN, generate more opportunities for investment through liberalisation of sectors, provide greater transparency on investment rules, and offer recourse to investors in times of conflict.

ASEAN countries are examining ways to converge and harmonise the many regulations, standards and procedures in our countries through Mutual Recognition Agreements (MRAs). To-date, two MRAs have been developed and are currently being implemented – the ASEAN Sectoral MRA on Electrical and Electronic Equipment (EEMRA) and the ASEAN MRA on Good Manufacturing Practice for Inspection of Manufacturers of Medicinal Products (GMP MRA). Three more MRAs are being negotiated in the automotives, prepared foodstuff and building and construction materials.

Work under the other pillars of the AEC is ongoing to lay the foundation for integration in newer areas, such as competition policy, taxation, infrastructure development, e-commerce, and Intellectual Property Rights (IPR).

Over the next one year, ASEAN will step up our efforts to realise the high-impact action plans. These include addressing NTBs, realising the customs single window, as well as deepening services and investment liberalisation. “Behind-the-border” issues such as improving trade facilitation and harmonising standards and conformance will also be placed at the forefront of ASEAN’s economic agenda. These remaining issues are challenging, but will offer the most benefits for our businesses and peoples.

Deepening integration as the only way forward

Overall, ASEAN is moving in the right direction towards greater economic integration. However, the challenges facing ASEAN have also grown in tandem. ASEAN countries recognised the need to build stronger, more lasting economic connections, both within our region, and with the outside world.

Why do we need to work so hard for closer integration? The first is simply that we do not have a choice. To remain an effective and efficient organisation in a rapidly changing world, ASEAN needs to work together to tackle emerging, cross-border challenges such as: (a) climate change; (b) inclusive growth; (c) environmental sustainability; and (d) territorial disputes.

Despite impressive economic growth in most parts of the region, millions of people are still entrenched in poverty. Income inequality has grown in some countries, while the benefits of development have continued to bypass many.

More effort has to be made to tackle the region’s declining natural resources. ASEAN cannot continue to build its economic wealth just by exploiting its natural resources alone.

Tensions rising from territorial disputes and political strains in some of our Member States will also need to be carefully managed.

The second reason for enhanced integration is a strategic one – creating a more united and cohesive organisation so that we are favourably positioned as the basis of the evolving regional architecture. This is where ASEAN has an opportunity to play a constructive role, as we provide a neutral core around which we can develop the regional architecture with our Dialogue Partners.

As the saying goes, “a chain is only as strong as its weakest link”. ASEAN’s viability and progress as an economic community is also dependent on how well each Member State’s development strategy syncs up with another. By developing complementary development strategies, we can reap the benefits of stronger regional supply chains, thereby presenting a more compelling value proposition for investors and better jobs for our people.

To be sure, while there will always be differing national priorities and perspectives, we should manage these differences in a constructive manner. We would do better to exchange ideas and share best practices on how our governments tackle domestic economic challenges, such as improving job quality, enhancing skills development, or boosting productivity and wages. As a cohesive region, we can achieve more together.

Integration beyond the region

For ASEAN to remain competitive in a globalised world, integration cannot stop at ASEAN’s borders. This is why even as we pursue deeper internal integration, ASEAN will continue to explore ways to strengthen our economic engagement with Dialogue Partners. One of the ways we try to do so is by reviewing and enhancing our existing FTAs with key trading partners and also commencing new FTA negotiations.

The on-going negotiations of the Regional Comprehensive Economic Partnership or RCEP are a defining point in ASEAN’s endeavour towards deeper integration beyond the region. The RCEP will bring ASEAN and its six FTA partners in closer economic linkages with each other, and will integrate a third of the world’s GDP and over three billion people, or 45 percent of the world’s population.

The RCEP goes beyond the existing five ASEAN Plus One FTAs in its coverage of both traditional and newer trade issues such as competition policy and intellectual property. In taking the lead to launch the RCEP with our FTA partners, ASEAN is undertaking an unprecedented commitment to further integrate our economies into the global value chain. ASEAN will continue to exercise leadership as Parties work towards concluding the RCEP by the end of 2015.

We are not alone in seeing the value of pursuing trade liberalisation and reform through FTAs. The ongoing negotiations of the Trans-Pacific Partnership (TPP) and the trilateral China-Japan-Korea FTA are significant regional integration efforts. Many of their members are major trading partners of ASEAN. These initiatives offer the prospect of still larger integration with ASEAN.

The RCEP and the TPP, for example, could provide a possible pathway to a Free Trade Area of the Asia-Pacific or FTAAP. If realised, the creation of the FTAAP will be a monumental step for the region and a leap for global trade reform, in reaffirmation of the multilateral trading system. Both architectures are open and inclusive to whichever economic partners ready to meet the individual benchmarks as set by its parties.

Developing Integration efforts beyond 2015

While 2015 will be a significant milestone for the AEC, it will not mark the end of ASEAN’s integration efforts. The current Blueprint alone is no longer sufficient for the organisation to retain its relevance in a fast changing world. ASEAN’s continued vitality and success will hinge on Member States’ willingness to embrace further changes and deepen regional economic integration beyond 2015.

In developing its post-2015 vision, ASEAN needs to take into account global mega trends, while staying ahead of the curve, so as to improve prospects for our countries and peoples. The post-2015 vision for the AEC will therefore comprise not only the enhancement of current ASEAN platforms and initiatives, but also include newer areas and priorities. One of the key objectives would be to allow ASEAN countries to move up the development ladder in an inclusive and sustainable manner, and to enhance ASEAN’s centrality in regional and global architectures.

Conclusion

Let me now conclude. ASEAN’s efforts at economic integration have helped to anchor ASEAN’s relevance to the world. It has also been instrumental in creating more opportunities for businesses operating in the region. ASEAN must sustain this good momentum and build on the positive inroads made.

ASEAN has consistently been Singapore’s most important market and largest trading partner accounting for about a quarter of Singapore’s trade with the world. Singapore remains committed to the ASEAN vision of deepening regional integration, as a free and open regional and global economy is an important part of the Singapore growth story. I am confident that ASEAN can fulfil most of our 2015 targets and beyond.